Build wealth and stay secure with insurance

Wealth creation to meet all your goals through life insurance takes prudent financial planning. HDFC Life’s Click 2 Wealth is an instrument that helps you fund many goals and offers life cover Wealth management is as important as wealth creation. Over the long term, wealth can be created to meet all your financial goals if you plan your finances prudently. It takes a four-
pronged approach to build wealth to optimum level. The first is investment, the second is risk
management, the third is insurance and the fourth is making a contingency plan for emergencies. It is through these four financial plans that you can ensure security and adequate liquidity through your lifetime.

INVESTMENT PLANNING

This aspect involves three categories – broadly based on the risk weightage they carry. The three categories are equity, debt and life insurance. The younger you are the higher should be your exposure to direct equity and equity-linked instruments. As you near the end of your working/earning years, you should shift your equity and equity-linked investments towards debt-based ones.
Equity investments come with risk while debt ones are risk-free. The returns too are higher
from the equity investments than from the debt ones.

RISK MANAGEMENT

This is a crucial factor in financial planning and wealth creation. Risks are many – market risks, industry risks, technology risks, and personal factors such as illness or job/business loss. You need to factor in the risk involved while choosing your instruments. The key questions are, ‘can you liquidate other/part of other instruments to meet the shortfall in case of a loss in one?’, ‘can you stop payments towards one without compromising too much on returns?’, and most importantly, ‘do you have the appetite for the risk involved?’
Risk management involves drawing from the contingency fund too. But always bear in mind
that any drawing from the contingency fund should mandatorily be replaced.

INSURANCE

This involves two forms – insurance for a specific purpose and insurance for life. Insurance for a specific purpose includes medical insurance, vehicle insurance and short-term policies covering travel etc. Life insurance policies cover risk for dependents – these are critical where there is only one breadwinner in the family.
You need to put together a prudent mix of policies in three broad categories – those for returns (investment-oriented), those covering risks (medical, accident etc) and those covering life (term policies too come under this category along with endowment). Insurance is like an umbrella – you know its worth only when it rains. And remember, every day isn’t a sunny one.

Here’s an insurance plan that helps build wealth:

HDFC LIFE CLICK 2 WEALTH: A STEP TOWARDS WEALTH CREATION

This is a unit-linked non-participating individual life insurance plan that offers market-linked returns. In this plan, you can choose from 11 funds to maximise your investment. It comes with an unlimited and free switching option. The fund charges are minimal – you only pay a fee towards managing your funds and a mortality charge towards your life cover. You get a one per cent premium allocation to your fund for the first five years. All future premium(s) will be waived off and the fund will stay invested in case of death of the proposer. This is in case the dependents are not earning.  

Long-term goals, fund boosters: It is prudent for investors to choose this option in case this benefit holds significance in terms of dependents benefiting from it. In case of premium waiver option, mortality charges pertaining to only the life assured is refunded. You can opt for systematic withdrawal from your fund for a post-retirement income. Also, you can use the withdrawals for planned expenses such as children’s higher education, marriage etc.

Golden years benefit option (get cover till 99 years of age): This is an option that offers you the solution to build your fund value while also having a life cover for whole of life (till 99 years of age). The fund value will be calculated by multiplying the balance units in your fund by the then prevailing unit price. On maturity date, the total amount of mortality charges deducted against your insurance cover through the policy (including mortality charge deducted on top-up sum assured as applicable) will be added to the fund value. The total cumulative amount of mortality charges deducted will be added to the fund value at the end of policy year coinciding or immediately following your 70th birthday.

How it works: Check your eligibility and choose your premium amount, premium paying
term and policy term. For the Click 2 Wealth Invest Plus Plan Option the age at entry is zero years (30 days) to 60 years. Age at maturity is 18 years to 75 years. The minimum premiums are – single Rs 24,000, annual Rs 12,000, half-yearly Rs 6,000, quarterly Rs 3,000 and monthly Rs 1,000.  
The policy term is 10 to 40 years. The premium payment term is single pay; limited - 5, 7 and
10 years; and regular - 10 to 40 years.

Choose your sum assured: It is possible to choose your options based on your specific requirements.

CONTINGENCY FUND

This is a life-saver. A contingency plan is a must for everyone. As a rule, ideally, a contingency fund should see you through six months of all expenses without a stretch. This will see you through a lean patch in business or job loss. Everyone should plan a continency fund at the earliest. In fact, this should be the first savings head as soon as you start earning.